Exporters caught in 'scissors' of high interest rates and strong ruble, but exchange rate should reflect interests of all market participants - Nabiullina
ST. PETERSBURG. July 2 (Interfax) - The exchange rate may not be in line with certain industries' expectations, but it should balance out the interests of all market participants, reflecting the balance of supply and demand from all, Central Bank of Russia Governor Elvira Nabiullina said.
"For example, things really are difficult for exporters right now. They are caught in the 'scissors' of high interest rates, a low exchange rate, as well as decreasing prices, and not just prices, for some [goods], but also a fall in demand on export markets. Alexander Valerievich [Dyukov, CEO of Gazprom Neft ] has said that too. The economy, the market economy, still needs an exchange rate that reflects the balance of supply and demand for currency among all participants," she said during a speech at the plenary session of the Central Bank's Financial Congress.
Nabiullina said that exporters would like the exchange rate to be weaker. "But I am not sure that this view will be shared by our citizens or the businesses that need to import equipment for technological modernization. I think, therefore, that it is in the interests of the economy as a whole to have an exchange rate that balances out the interests of different market participants, and to achieve that through market means rather than through the constant battling of lobbyists, through patching up regulations or moulding the exchange rate to fit whatever our needs are. It seems to me that this is one of the advantages of a market economy, and we need to value it," she said.
"People also tell us that a weak exchange rate is necessary for the budget, but its impact on the budget is also non-linear. That is because the appreciation of the ruble has the effect of slowing inflation, and therefore can also decrease the key rate much more quickly than when the exchange rate is weaker," Nabiullina said.
She said that on the whole, the more the economy diversified, the less dependent it would be on profits from a small circle of export industries and therefore also on the exchange rate.
"If you take a look at other countries, it is the countries with low inflation that have a stronger exchange rate. A weak exchange rate often means vulnerability, chronically high inflation and the country's distrust towards its own currency. I doubt that is what we are striving towards systemically," the CBR governor said.
